trending Market Intelligence /marketintelligence/en/news-insights/trending/7a8AxFfXVOLt--3cVyFp_g2 content esgSubNav
In This List

Boeing, Embraer sign joint venture deal for commercial planes


Street Talk | Episode 126: Hunting the bears, making the bull case for CRE


Investment Banking Essentials May 15


Panel Discussion: Modernization Initiatives Advancing the U.S. Capital Market


Technology & Automation Insights: Elevating KYC and onboarding efficiency

Boeing, Embraer sign joint venture deal for commercial planes

Boeing Co. and Embraer SA said they were forming a joint venture that would give the U.S.-based aerospace company an 80% stake.

The nonbinding agreement is valued at $3.8 billion, the companies said in a July 5 statement. No financial terms for the deal were announced by the companies, though someone familiar with Boeing's views said it was in a strong cash position to do these kinds of strategic, complementary deals.

The deal, which value Embraer's commercial aircraft operations at $4.75 billion "will create the most important strategic partnership in the aerospace industry," Paulo Cesar de Souza e Silva, Embraer's president and CEO, said.

Boeing Chairman, President and CEO Dennis Muilenburg said the deal was in keeping with the Chicago-based company's "long-term strategy of investing in organic growth and returning value to shareholders, complemented by strategic arrangements that enhance and accelerate our growth plans."

The joint venture, which had been under review by the two companies for several years, received additional impetus when Boeing competitor Airbus SE cut a deal last year to take a majority stake in Bombardier Inc. to manufacture the Canadian company's C-series jet, a narrow-body plane which is the chief rival to similar Embraer aircraft.

The Airbus-Bombardier deal came despite Boeing's allegations that Bombardier received illegal government backing from a bailout that allowed it to undercut Boeing in sales of its C-series jetliner. The U.S. International Trade Court held against Boeing in January, stymieing potential tariffs from the Commerce Department.

The joint venture between Boeing and Embraer will also work on developing another joint venture for the São Paulo-based company's new military cargo jet, the KC-390, as well as other defense applications, the statement said.

Though the Brazilian government and the military reportedly have given signals that they will sign off on a deal after assurances it would provide jobs and promote technology research and development, presidential elections in the autumn featuring populists from both left and right may be a source of uncertainty.

The transaction is expected to close by the end of 2019, subject to shareholder and regulatory approvals and approval from the Brazilian government, the statement said.

Boeing expects the transaction to be EPS-accretive from 2020 and result in pretax cost synergies of about $150 million by the third year. The transaction will not have any impact on Boeing's and Embraer's financial guidance for 2018, the statement said.